Pouring on the costs

It’s only a nickel, but the region’s beverage manufacturers say costs tied to bottle deposits drive up expenses so much that operations would be threatened if more products are added to the bottle bill

New York’s bottle bill costs area beverage manufacturers hundreds of thousands of dollars each year and creates major headaches for their accounting departments.

And while bottled juice, sports drinks and tea aren’t currently eligible for 5-cent deposits, they could be soon.

If that happens, manufacturers say those headaches would become more painful, jobs could be lost and the money and resources needed to manage it could increase.

The bill was amended in 2009 to include bottled water. When enacted, product was removed from retailers’ shelves for re-labeling, and manufacturers had to set up escrow accounts to deposit nickels for containers so the state could be pre-paid by them.

For every unreturned container, the manufacturer gets a penny while the state keeps 4 cents, which contributes about $115 million annually to the state’s general fund.

The amended bill, part of the state budget passed in March, shifts a portion of that 4 cents to New York’s environmental protection fund and adds new responsibilities to manufacturers such as Mayer Bros. and Coca-Cola Bottling Company of Buffalo Inc.

In addition to countless hours spent projecting how much the state will need in escrow, they’re now required to send labels, cans and cartons to Albany for every product eligible for deposit. The goal is to create tighter rules to stanch fraud, which Sen. Mark Grisanti, R-Buffalo, estimates as a $100 million problem in New York.

“We have an intense Excel spreadsheet that we monitor every week because the state requires us to pay deposits on every container we sell,” said Flora Torina, director of finance at Coca-Cola Bottling Co. “I probably spend 25 percent of my time with the bottle bill, transferring money and sending forms to the state when they want to be paid.”

“Administratively, this thing has become a headache. It’s a major accounting burden,” said Alan Zak, controller at West Seneca-based Mayer Bros.

All told, fewer than 40 of the 100 products at Mayer Bros. have 5-cent deposits, compared to 179 of 338 at Coca-Cola.

Coca-Cola officials wouldn’t disclose the number of bottles, cans or cases annually produced. They also wouldn’t disclose how much the bottle bill affects the company, only that it is well over $1 million. If juice, tea and sports drinks are to have nickel deposits added to them, products including Campbell’s V8, Minute Maid juice, Vitamin Water, Powerade and Fuze juice lines would increase that dollar amount by more than 50 percent.

“The cost and resources needed up-front would be the biggest issue, as that would affect about 99 percent of our products,” said Rick Horn Jr., vice president and general manager of Coca-Cola Bottling Co.

Calls to Try-It Distributing Co. Inc., meanwhile, were not returned.

Horn said he appreciates that the state is looking to reduce fraudulent redemption practices, where consumers from nearby states without deposits on cans and bottles cross the border into New York to collect 5 cents on containers with no deposits. Some attach cans to sticks as scanners read bar codes on one can many times, paying out the nickel each time the label is scanned.

Joe Erdman, director of the state Senate’s Environmental Conservation Committee, said Grisanti, who chairs the committee, wouldn’t support a measure that requires deposits on additional containers. But Horn and Zak have heard that amendments on the table would add the other products.

“It’s a strong possibility; that’s what we’re being told,” Horn said.

Chris Gindlesperger is a spokesman for the American Beverage Association, a Washington, D.C.-based public policy organization that represents franchises of the soft drink industry. He said adding extra containers would be costly to the industry, and something the association would oppose.

“It adds cost in terms of business logistics, and it takes away from resources where we should be focusing, which is on expanding comprehensive programs like curbside recycling that addresses all recyclables, not just bottles and cans,” Gindlesperger said.

Laura Haight of the New York Public Interest Research Group said its research has determined that the vast amount of bottles and cans don’t end up in curbside recycling. Instead, she said, “they end up as garbage or litter. And our streets, rivers and streams are cleaner because of the bottle bill.”

Haight added the bill won’t be expanded soon, but it will eventually.

“I see no movement under way to make that happen in the short term, but we’ve been working on it and there’s a lot of support for it,” she said.

This is a concern to Horn, who’s preparing for more products to include the 5-cent deposit. If that happens, he said the price of Coca-Cola consumer goods may increase.

“And when you do that, your volumes will struggle a little bit,” he said. “Our goal is to not lay people off, but if volumes suffer, we may not need as many loaders, drivers, merchandising crew and production. A lot of different areas of the business could be affected. Things like tuition reimbursement, 401(k) and other things we’d have to look at.”

Horn said a worst-case scenario would have production of some or all product being transferred from the Tonawanda facility and having product shipped in, possibly from Abarta Inc.’s plant in Twinsburg, Ohio.

Zak offered a solution: Instead of layers of accounting and escrow accounts and rectifying things with distributors, things can be simplified with a 2-cent tax on all containers.

Erdman said any new tax would probably not be looked on favorably by Grisanti or the state government.

“The beauty is that the nickel has been very successful in the number of bottles being recycled,” Erdman said. “You put the nickel up-front and get it back at the end.”